Mike Lindenberg

Mike Linenberg questioned how much of the current demand strength is driven by a favorable supply backdrop and where demand is strongest across the network, particularly in regions like Vegas. He also asked about the Hart-Scott-Rodino filing timeline for the Sun Country merger and the financing plan for the cash component of the acquisition.

Answer

Drew Wells, Chief Commercial Officer, noted that reduced seats help, but emphasized strong website visitation across geographies, including Vegas, which is becoming more event-driven. Greg Anderson, CEO, added that concentrated flying in peaks also helps. Greg Anderson stated that HSR and shareholder vote filings are expected in the coming weeks, with a Q2 2026 close. Robert Neal, President and Chief Financial Officer, mentioned potential refinancing of a 2027 bond or using existing cash and unencumbered aircraft for the cash consideration.

Mike Linenberg inquired about the drivers of strong demand, specifically asking how much is due to a favorable supply backdrop and if demand strength varies geographically across the network, particularly in markets like Vegas. He also asked about the Hart-Scott-Rodino filing timeline for the Sun Country merger and the financing plan for the $200 million cash component.

Answer

Chief Commercial Officer Drew Wells noted that while reduced seats help, overall website visitation is stronger than in previous years, with geographic demand looking robust despite Vegas's struggles. CEO Greg Anderson added that concentrating flying in peaks also helps. Regarding the merger, CEO Greg Anderson stated they expect to file HSR and shareholder vote documents in the coming weeks, aiming for a Q2 2026 close. President and CFO Robert Neal mentioned potential refinancing of a 2027 bond or using existing cash/unencumbered aircraft for the cash consideration.

Mike Linenberg inquired about SkyWest's ability to capitalize on the Chicago hub growth with both major partners and sought clarification on the trending of deferred revenue recognition for 2026. He also asked for clarification on the Q1 2026 EPS seasonality guidance relative to Q4 2025 GAAP EPS, specifically if the Q4 number should be adjusted for the government shutdown.

Answer

Chip Childs, President and CEO, stated that under capacity purchase agreements, major partners dictate schedules and aircraft deployment. Rob Simmons, CFO, indicated that deferred revenue recognition for 2026 is expected to be in the $20-$25 million per quarter range, with Q4 2025 being lower due to contract extensions. He confirmed that the Q1 2026 EPS guidance (flat to down from Q4 2025) is based on the reported Q4 GAAP number, without adjustment for the government shutdown.

Mike Linenberg inquired about SkyWest's ability to leverage its relationships with major carriers to capitalize on regional flying growth in the Chicago market. He also asked about the expected trend for deferred revenue recognition in 2026 and sought clarification on the Q1 2026 EPS guidance relative to Q4 2025 GAAP EPS, considering the government shutdown's impact.

Answer

Wade Steel, Chief Commercial Officer, explained that under capacity purchase agreements, major partners dictate schedules and aircraft deployment, and SkyWest works with them to ensure reliable operations. Rob Simmons, CFO, projected deferred revenue recognition to be in the $20-$25 million per quarter range for 2026, noting that Q4 2025 was lower due to contract extensions. Rob Simmons clarified that the Q1 2026 EPS guidance (flat to down from Q4 2025 GAAP EPS) is based on the reported GAAP number, reflecting sharper seasonality.

Mike Linenberg asked CFO Tom Doxey for clarification on the net CapEx number, specifically if it includes aircraft divestitures or sale-leasebacks, and for a sense of the gross CapEx and divestiture gains in 2025. He then asked COO Andrew Watterson about the new segmentation, its current stage, key milestones, and how the previous majority of lowest fare bucket bookings will evolve.

Answer

CFO Tom Doxey confirmed that the net CapEx range includes an element of aircraft sales, not sale-leaseback gains. COO Andrew Watterson explained that Southwest is moving to product-based segmentation, expecting current customers to buy up, and anticipates going from 80%+ lowest fare bookings to half or less, with acceleration expected through February and March.

Mike Linenberg asked for clarification on the net CapEx number, specifically if it's offset by aircraft sales rather than sale-leaseback gains. He also inquired about the evolution of segmentation, asking what 'inning' the company is in and key milestones, particularly regarding the shift from the lowest fare bucket.

Answer

CFO Tom Doxey confirmed that the net CapEx figure is primarily offset by aircraft sales. COO Andrew Watterson explained the shift to product-based segmentation, noting that current customers are buying up and the company expects to move from 80%+ lowest fare bookings to half or less, with more clarity expected in February and March.

Mike Linenberg inquired about specific statistics on recent initiatives, including the inflection in connections, entertainment outperforming passengers, and improved load factor. He also asked for details on the basic economy rollout, particularly the buy-up rates and how the proportion of tickets sold in the bottom fare bucket has changed.

Answer

COO Andrew Watterson confirmed positive load factor inflection post-summer, attributing it to enhanced connectivity, third-party channels, and the basic fare rollout. He noted a mid-single-digit increase in optional buy-ups, with a larger step-up expected in Q1 2026. CFO Tom Doxey and CEO Bob Jordan reiterated that all initiatives are on track, with early bookings for assigned seating showing encouraging trends and a four-point higher Net Promoter Score on reconfigured aircraft, even before assigned seating officially launches.

Mike Linenberg asked for clarification on the increase in JetBlue's unencumbered assets to $6.5 billion from a previously quoted $5 billion, and inquired about the timeline for selling first-class seats and the full rollout of the domestic first-class product across the fleet.

Answer

Ursula Hurley, CFO, explained that the increase in unencumbered assets was due to updated appraisals, including aircraft deliveries purchased with cash in 2025 and incremental value from the loyalty program. Marty St. George, President, stated that the first aircraft with domestic first class is expected to roll out in Q3, with about 20% of the fleet completed by year-end, the majority by end of 2027, and full completion in 2028.

Mike Linenberg asked CFO Ursula Hurley for clarification on the reported $6.5 billion in unencumbered assets, noting it was higher than previous figures, and inquired about the reasons for this increase. He also asked President Marty St. George about the timeline for selling and rolling out the new domestic first-class seats across the fleet.

Answer

CFO Ursula Hurley confirmed the increase from $5 billion to $6.5 billion, attributing it to updated appraisals on unencumbered assets, including aircraft deliveries purchased with cash and incremental value from the loyalty program. She detailed the breakdown: 30% aircraft/engines, 20% loyalty, and the remainder in slots, gates, routes, and brand. President Marty St. George stated that the first aircraft with the new first-class product is expected to roll out in the third quarter, with approximately 20% of the fleet completed by the end of the year, the majority by the end of 2027, and the remainder in 2028.

Mike Linenberg inquired about the status of the proposed Brazilian law to mandate free checked bags and seat selection, its scope (domestic vs. international), and its progression through the legislative process. He also asked about LATAM's long-term capital allocation strategy, specifically regarding the regularity of share buybacks versus opportunistic initiatives.

Answer

Roberto Alvo, CEO of LATAM Airlines Group, confirmed the Brazilian lower chamber passed a law for free bags and seat selection (domestic and international), which still needs Senate approval and potential presidential veto. He expressed LATAM's opposition due to potential fare increases. Regarding capital allocation, Mr. Alvo stated business growth is the priority, and while a balanced mix of initiatives has been pursued, future decisions on buybacks and dividends are board-level and depend on results and market opportunities.

Mike Linenberg inquired about the status of a proposed Brazilian law mandating free checked bags and seat selection, its applicability to domestic and international flights, and its legislative progress. He also asked about LATAM's long-term capital allocation strategy, specifically regarding the regularity of share buybacks.

Answer

CEO Roberto Alvo confirmed the Brazilian lower chamber passed a law for free checked bags and seat selection on domestic and international flights, awaiting Senate review and potential presidential veto, which LATAM opposes due to potential fare increases. CFO Ricardo Bottas stated that business growth is the priority for capital allocation, noting a balanced mix of initiatives in 2025, with future buybacks being a board decision.

Mike Lindenberg of Deutsche Bank asked about United's upcoming decision on the future shape and size of its wide-body fleet, specifically how the historical pain points and costs associated with introducing additional aircraft types have evolved or if they remain prohibitively expensive.

Answer

EVP and CFO Mike Leskinen acknowledged the complexity costs of additional aircraft types, stating this hasn't changed for United. He explained that the decision involves weighing these costs against different aircraft capabilities (range, gauge), price, and expected maintenance costs to optimize long-term profits.

Mike Lindenberg asked about the financial impact of past government shutdowns on Delta, specifically recalling the 2018-2019 period and how it started to affect the company. He also questioned what has changed to make non-hub flying in focused cities like Boston profitable for Delta.

Answer

President Glen Hauenstein recalled that the previous government shutdown cost Delta about $1 million a day, which is now less than $1 million a day due to factors like reduced DCA travel. He explained that focused cities are profitable because they enhance Delta's relevance, allowing the acquisition of SkyMiles members and co-brand cardholders, which are crucial for the loyalty ecosystem, sometimes exceeding hub profitability.

Mike Lindenberg asked about the impact of the current government shutdown, recalling the 2018/2019 shutdown and its financial effect on Delta. He also inquired about Delta's focus on Boston, a non-hub city, and what has changed to make such flying profitable, historically being lower margin.

Answer

President Glen Hauenstein recalled the previous shutdown's impact was about $1 million a day, but the current impact is less than that, partly because DCA travel was already down. He explained that Delta's strategy for focused cities like Boston (and Austin) is driven by customer relevance, which enables the acquisition of SkyMiles members and co-brand cards, creating a profitable ecosystem. These focused cities have proven quite profitable, sometimes exceeding hubs.

Inquired about the financing for new 2024 aircraft deliveries and the drivers behind the forecast for positive operating cash flow starting in March.

Answer

All 2024 aircraft deliveries are fully financed via sale-leasebacks or direct leases. The positive cash flow forecast is driven by an expected domestic market recovery, seasonal strength, and internal cost management initiatives, leading to expected positive margins in Q2, Q3, and Q4.